Bankruptcy

Massachusetts Debt Collector Gets Sanctioned by Florida Bankruptcy Court

By Bill McLeod, Esq.

A Massachusetts debt collector along with the creditor has been sanctioned by the bankruptcy court in Florida for violating the discharge injunction. On April 4, 2007 Olson filed a Chapter 7 petition in the US Bankruptcy Court for the Southern District of Florida. On his schedules, he listed a debt owed to Wells Fargo Financial in the amount of $976. Two separate addresses for Wells Fargo appeared on the creditor matrix. His creditor?s meeting was held on May 3 and on July 3 he received his discharge.

In a letter dated March 10, 2008, Nelson, Watson & Associates, LLC in Haverill sent a letter to the debtor demanding payment in the principal amount of $976.71 and with interest, a total balance of $1,353.65. The debt was now purportedly held by North Star Capital Acquisitions. Payment was demanding by the close of business on March 31, 2008. On March 18, 2008, the Debtor moved to report his bankruptcy case, and that motion was allowed on March 31.

On that same date, the Bankruptcy Court issued an Order to Show Cause. The order directed Nelson, Watson & Associates, LLC and North Star Capital Acquisition LLC to appear before the court through counsel on April 21, 2008 to show cause why they should not be held in contempt for making a demand for payment on the debtor. The order was mailed to the CEO of North Star at its New York address and at its agent?s address in St. Paul, Minnesota. It was mailed to Nelson, Watson & Associates LLC at its Merrimack Street address in Haverhill (the order reflects the same address that appears on Nelson?s website).

April 21, 2008 came, and no one appeared. This is a problem for two reasons: (1) it?s a court order and when the court orders you to appear before it, you do so and (2) no one got to hear their side of the story. No even a written statement was field. It was as if they played possum.

You can imagine that this displeased the court. On April 28, the court held Nelson, Watson & Associates, LLC along with North Stat in contempt of court because they failed to attend the hearing and they violated the discharge injunction. Both were ordered to pay fines in the amount of $2,500. If they did not pay their fines by May 30, the court stated that it would issue a separate order directing the US Marshal to APPREHEND David Paris, CEO of North Star and George Nelson, III, Manager of Nelson, Watson & Associates,LLC for the purpose of ?bringing [them] before the Court to explain [their] contemptuous conduct and why further sanctions should not imposed.? They were also ordered to obey the discharge injunction.

On May 6 Nelson paid its find and North Star paid on May 13. The case remains open.

As an aside, it takes less than 30 seconds to determine if someone has filed bankruptcy. Debtor's attorneys routinely do it as part of their due diligence in preparing bankruptcy petitions. Since there is no response from Nelson, we're all left wondering: did you check and send the letter anyway? or were you just negligent? Without an explanation, we'll never really know the truth (but I encourage them to chime in and comment if they get wind of this blog post).

In re Olson, US Bankruptcy Court, Southern District of Florida at Fort Lauderdale, 07-12387.

Full post as published by McLeod Law Offices on June 10, 2008 (boomark / email).